The gross foreign exchange reserves in Bangladesh, according to the International Monetary Fund guidelines, dropped below $20 billion again on Wednesday.
According to Bangladesh Bank data, the foreign exchange reserves reached the current level on the day from $21.86 billion on December 28.
However, based on the Bangladesh Bank’s conventional valuation, the foreign exchange reserves were reported as $25.09 billion on that day.
The forex reserve had previously dropped to $19.13 billion on December 6, 2023, but recovered to $21.74 billion on January 4 after receiving $689 million in loans from the International Monetary Fund and $400 million from the Asian Development Bank.
However, the reserves began declining again soon after.
The decline in the country’s foreign exchange reserves continued due mainly to a significant dollar shortage on the market, which has compelled the central bank to continue selling dollars to the banks from its reserves, BB officials said.
On January 8, the reserves significantly depleted as import payments of $1.27 billion were made to the Asian Clearing Union for November and December.
The Asian Clearing Union is a payment settlement forum whereby the participants settle payments for intra-regional transactions through participating central banks on a net multilateral basis.
Payment obligations of transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are settled through the ACU payment system.
Apart from the payment obligations to ACU, the ongoing sales of foreign currency to the country’s banks by the central bank contributed to the reduction in the country’s foreign exchange reserves.
The central bank has been selling dollars to commercial banks, with more than $29 billion sold over the past 31 months.
This included $8 billion allocated to banks in July-January of the financial year 2023-24, $13.5 billion in FY23 and $7.62 billion in FY22.
The country’s financial sector is grappling with a severe dollar shortage as the value of the greenback continues to rise.
In response, the government and the central bank have implemented measures to restrict imports, particularly luxury and non-essential items.
Several banks are now collecting remittances at as high as Tk 124 per dollar to meet their demand, even though the rate was set at Tk 110.5 per dollar by the Association of Bankers, Bangladesh and the Bangladesh Foreign Exchange Dealers’ Association.
The Bangladesh Bank follows the IMF’s BPM6 for calculating gross and net international reserves.
The net reserve, according to the IMF guidelines, was below $17 billion.